Silver Proves It’s Mettle

By Tatyana Shumsky

Silver was saved from the scrap heap Friday, as an unexpected bout of progress from European leaders sparked a broad based rally that lifted silver 5.1% .

The iShares Silver Trust ETF had a big day, too, rising 4%.

Silver prices had scraped their 19-month low, at around $26 a troy ounce, ahead of the EU news.

“It just has bounced completely off it,” said Joe Kobel, a senior market strategist with RJO Futures. He added that with more optimism in the market following surprise progress in the euro zone, silver futures are surging higher.

Over the past year and a half the $26 level has acted as a springboard for silver prices, catapulting the Devil’s metal to a fresh rally each time prices sank toward this line. But silver’s repeated need to revisit this price area has worried technical traders, who cautioned that prices could break sharply lower if this line in the sand were crossed.

On Thursday, silver faced its moment of truth as futures grazed a low of $26.070 a troy ounce. The declines, like honey, called silver bears out of the woods, with strategists warning a break lower could trigger automatic selling orders that could easily slash prices toward the low $20-range.

Silver bulls, equally fervent in their belief that the grey metal would repeat a path prices have traced over and over again, dug in.

“We think silver’s been undervalued,” said Michael Cuggino, who manages $17 billion at the San Francisco-based Pacific Heights Asset Management and holds silver in his Permanent Portfolio fund.

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